Calif. Bill Keeps Charitable Deduction in Reach for More Taxpayers

California nonprofit leaders have endorsed a maneuver in the state legislature that would allow the state’s taxpayers to offset the loss of state and local tax deductions on their federal tax bills by earning state tax credits for donations to a state charitable fund.

The legislation could help keep the federal charitable deduction within reach for at least some middle- and upper-middle-income earners in California otherwise expected to take the newly doubled standard deduction, now $24,000 for couples and $12,000 for individuals.

"We actually think it gets around some of the complaints about the federal bill, which is that by doubling the standard deduction, fewer people will be able to itemize and therefore won’t be motivated to continue their charitable giving at the same level," said Nancy Berlin, policy director at the California Association of Nonprofits, which is calling on lawmakers to vote "yes" on the measure.

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David Thompson, vice president for public policy at the National Council of Nonprofits, said his organization has not come out with a stance on the measure in California or elsewhere even as his group follows the lawmaking closely. Enabling more people to take the charitable deduction is a good thing, Thompson said, but added that the measure could add to existing confusion about the structures, finances, and governances of charities.

"This blurs the lines between governments and nonprofits," Thompson said. "This is a line we are fighting, especially at the state level, to make as bright as possible."